Iranians accused of seizing Iraq oil field

Two countries in talks over alleged incursion into disputed territory

Iraq was last night seeking a diplomatic solution to what it said was an incursion of Iranian troops who crossed into its territory and occupied an oilfield on Thursday night.

The incursion, which Iran denies, raised the spectre of another confrontation between the two neighbours who fought a war from 1980 till 1988, partly caused by Iraqi claims of Iranian trespassing. Yesterday Iraq demanded that the troops withdraw, but after an emergency meeting of its national security council it said the two countries have begun negotiations to resolve it.

Since the last PoWs were exchanged in 2003, the Iraqi government, now headed by Nouri al-Maliki, has generally enjoyed good relations with Tehran. But the Iranian regime has been watching with keen interest the award of massive oil contracts across the border, and the incursion is seen as a strategic step to establish its claim in a disputed border area which is also rich in petroleum potential.

The Baghdad officials say the Iranians have "trespassed" into the al-Fakkah oilfield, one of the largest in the region, which straddles the border between the two countries, three times in the last month. But this time, they are said to have pulled down the Iraqi flag and raised their own.

Both countries claim that the No 4 well, the most productive in the field, belongs to them. "As well as the flag, they have also dug a trench around the oil well and deployed armoured cars," said Brigadier-General Dhafir Nadhmi of the Iraqi army. "They have taken control of the field. We are waiting for orders from our government."

In Baghdad, Mr Maliki called on fellow Iraqis to remain calm and insisted his government would not resort to military action at this point. But he also convened an emergency meeting of the country's National Security Council, and additional units of border security guards were moved forward towards the oilfield.

In Tehran, Iran's semi-official Mehr news agency later quoted the National Iranian Oil Company, saying: "The company denies Iranian soldiers taking control of any oil well inside Iraqi territory." But Iraq's deputy foreign minister, Mohammed Haj Mahmoud, said: "This move by the Iranians took place at around 3.30pm. We are co-ordinating with the Oil Ministry on this. This is not the first time that the Iranians have tried to prevent Iraq from investing in oilfields in border areas. We might summon the Iranian ambassador to discuss this issue."

The Iranian action led to oil prices rising on the international markets. In Washington the State Department said that although the Iranians have crossed the border before, they had never ventured this far forward, and the move was a "matter of concern". No American troops are in the area.

Last year, Iraq accused Iran of stealing oil from the al-Fakkah field and of illegally seizing and capping wells in a second field, Abu Gharb, which Iraq claims lies entirely within its territory. Both fields are in Maysan province in the Shia south, where international energy companies, including Shell, have taken an interest.

Iraq has an estimated 115 billion barrels of proven oil reserves, the world's third largest, behind Saudi Arabia and Iran. After the auction of its oilfields to foreign companies, deals to exploit seven of which were agreed this week, Baghdad aims to raise production from its present level of 2.5 million barrels a day to 12.5 barrels, equivalent to Saudi production levels.

Other members of the Organisation of Petroleum Exporting Countries (Opec), the cartel which controls oil production, would have to reduce their own production quotas to keep up the price of oil to accommodate Iraq's surge. But this would mean reduced revenues, which is of particular concern to countries such as Iran and Venezuela whose production has been shrinking. Iraq argues that it deserves special dispensation because it needs to make up for loss of revenue during the latest war.